European gas hits four-year peak as storage falls to decade low

Wholesale gas prices across Europe reached a four-year high on Monday.

Traders pushed the benchmark price to 97 euros, or 81 pounds, per megawatt-hour. This level had not been seen since 2022. The spike coincides with falling temperatures across the continent. Traders are pricing in a sharper increase in demand for heating.

In the United Kingdom, the month-ahead contract rose by 4 percent to 240 pence per therm. That figure represents the highest level since December 2022. Prices had previously surged following Russia's full-scale invasion of Ukraine. The current rise in gas costs arrives alongside growing anxiety over supply in the Middle East. Reports indicate the United States and Israel have prepared plans for renewed strikes against Iran. Those plans are expected to be considered after the US midterm elections.

Those geopolitical developments influenced oil markets as well. The price of oil climbed to 117 dollars a barrel on Friday. The international Brent crude benchmark dropped by about 2 percent on Monday. It remains above 114 dollars a barrel.

Europe is entering winter with lower gas reserves than at any point in over a decade. Storage levels stand at approximately 75 percent. The seasonal average for this time of year is closer to 80 percent. A slowdown in exports from Qatar contributed to the drop. Higher summer consumption for refrigeration and cooling also played a role.

UK energy regulators expect the country to pay among the highest energy costs in Europe this winter. The nation relies heavily on imports to maintain a steady supply. Britain holds some of the smallest gas stores in Europe after decades of relying on North Sea production. The Office for National Statistics reported that the UK paid a record 4 billion pounds on power imports in the year ending in August. Half of that cost went toward electricity imported from France. The country also made near-record payments to fire up gas plants while wind and solar farms were paid to shut down due to grid bottlenecks.

British households face a 16 percent rise in energy bills in January. The typical annual dual fuel bill will reach the equivalent of 2,000 pounds. European stock markets showed slight gains on Monday following the weaker oil price. The Stoxx Europe 600 index, which tracks major continental companies, rose by 0.3 percent in early trading. The UK's FTSE 100 index climbed by 0.4 percent.